Testimony 

Before the Subcommittee on Foreign 

Operations, Export Financing, and Related 

Programs, Committee on Appropriations, 

House of Representatives 

United States General Accounting Office 

GAO

For Release on Delivery 

Expected at 2:00 p.m. EDT 

Wednesday, May 7, 2003 GLOBAL HEALTH 

Assessment of First Year 

Efforts of the Global Fund 

to Fight AIDS, TB and 

Malaria 

Statement of David Gootnick 

Director, International Affairs and Trade 

GAO-03-755T 
• The Fund has made noteworthy progress in establishing essential governance 

and other supporting structures and is responding to challenges that have 

impeded its ability to quickly disburse grants. A key challenge involves locally 

based governance structures, many of which are not currently performing in a 

manner envisioned by the Fund. 

• The Fund has developed comprehensive oversight systems for monitoring and 

evaluating grant performance and ensuring financial accountability and has 

issued guidance for procurement; however, the oversight systems face 

challenges at the country level and some procurement issues have not been 

finalized. 

• The Fund’s ability to approve and finance additional grants is threatened by a 

lack of sufficient resources. Pledges made through the end of 2003 are 

insufficient to cover more than a small number of additional grants and without 

significant new pledges, the Fund will be unable to support all of the already 

approved grants beyond their initial 2-year agreements. 

Pledges Made, Amount Received, and Grant Proposals Approved 

a

The pledges expected through 2008 include $173 million that has no specified arrival date. 

b

These numbers represent the maximum amount approved by the board. Final budgets may be reduced 

 during grant negotiations. Five-year figures are potential, rather than guaranteed, commitments. 

Note: A shortfall in the funding of already approved grants is evident when 5-year commitments are 

compared with total pledges over this time frame. The small amount of resources available for funding 

new grants is evident when comparing 2-year commitments with pledges through 2003. 

• Improvements in the Fund's grant-making processes have enhanced its ability 

to achieve its key objectives, but challenges remain. These challenges include 

ensuring that grants add to and complement existing spending on HIV/AIDS, 

TB, and malaria and that recipients have the capacity to effectively use grants. 

By the end of 2002, more than 40 

million people worldwide were living 

with human immunodeficiency 

virus/acquired immunodeficiency 

syndrome (HIV/AIDS), with 5 million 

newly infected that year. HIV/AIDS, 

along with tuberculosis (TB) and 

malaria, causes nearly 6 million deaths

per year and untold human suffering. 

Established in January 2002, the 

Global Fund (the Fund) aims to 

rapidly disburse grants to augment 

existing spending on the prevention 

and treatment of these three diseases 

while maintaining sufficient oversight 

of financial transactions and program 

effectiveness. As of April 1, 2003, the 

United States had pledged $1.65 

billion to the Fund and is expected to 

remain its single largest donor. In this 

study, GAO was asked to assess (1) 

the Fund’s progress in developing 

governance structures; (2) the systems 

that the Fund has developed for 

ensuring financial accountability, 

monitoring and evaluating grant 

projects, and procuring goods and 

services; (3) the Fund’s efforts to raise 

money; and (4) its grant-making 

process. 

In responding to our draft report, the 

Fund, the Department of Health and 

Human Services, the Department of 

State, and the U.S. Agency for 

International Development agreed with 

our findings. 

www.gao.gov/cgi-bin/getrpt?GAO-03-755T.

To view the full report, including the scope 

and methodology, click on the link above. 

For more information, contact David Gootnick 

at (202) 512-3149 or gootnickd@gao.gov. 

Highlights of GAO-03-755T, a report to the 

Chairman, Subcommittee on Foreign 

Operations, Export Financing, and Related 

Programs, House Committee on 

Appropriations 

May 7, 2003 

GLOBAL HEALTH 

Assessment of First Year Efforts of the 

Global Fund to Fight AIDS, TB and Malaria 
Page 1 GAO-03-755T 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss our assessment of the first full 

year of operation of the Global Fund to Fight AIDS, Tuberculosis and 

Malaria (“the Fund”). 

By the end of 2002, more than 40 million people worldwide were living 

with human immunodeficiency virus/acquired immunodeficiency 

syndrome (HIV/AIDS), with 5 million newly infected that year. HIV/AIDS, 

along with tuberculosis (TB) and malaria, causes nearly 6 million deaths 

per year. In addition to causing human suffering in sub-Saharan Africa and 

elsewhere in the world, these diseases threaten economic growth and 

raise the potential for increased conflict and political instability. In 

January 2002, the Fund was established as a grant-making entity with the 

goal of rapidly increasing spending on the prevention and treatment of 

these diseases in resource-poor settings while maintaining sufficient 

oversight of financial transactions and program effectiveness. 

My remarks will focus on several key areas, as discussed in our report 

issued today:1

 (1) the Fund’s progress in developing key governance 

structures, (2) the oversight mechanisms and procurement policies 

approved by the Fund, (3) the Fund’s efforts to mobilize resources, and (4) 

the Fund’s grant-making processes. I will highlight the progress made and 

the key challenges that the Fund faces in each of these four areas. 

My observations are based on the work that our GAO team conducted 

over the previous year. For this project, our team conducted audit work 

that included site visits to Fund headquarters in Geneva, Switzerland, and 

to Ethiopia, Haiti, Honduras, and Tanzania— four countries that were 

awarded grants. We also obtained perspectives on the progress and 

evolution of the Fund from officials at the Department of State, the U.S. 

Agency for International Development, and the Department of Health and 

Human Services. 

The Fund has established key governance structures, including a board of 

directors, a secretariat, and a grant review process. It also has called on 

 1

U.S. General Accounting Office, Global Health: Global Fund to Fight AIDS, TB and 

Malaria Has Advanced in Key Areas, but Difficult Challenges Remain, GAO-03-601

(Washington, D.C.: May 7, 2003). 

Summary 
Page 2 GAO-03-755T 

potential recipient countries to establish structures at the country level to 

develop, implement, and oversee grants. The principal country-level 

governance structure, the Country Coordinating Mechanism (CCM), is 

designed to provide a forum for locally based stakeholders to develop, 

review, and submit grant proposals to the Fund and to follow the progress 

of Fund-supported projects. However, a number of challenges—for 

example, communication difficulties between the Fund and the CCM and 

between the CCM chair and its members—have slowed the establishment 

and effective operation of this key structure. The Fund has acknowledged 

the CCM-related challenges and is working to address them by enhancing 

its guidance and communications with CCMs. 

The Fund has developed comprehensive oversight systems for ensuring 

financial accountability and monitoring and evaluating grant performance, 

and it has issued guidance on procurement. The Fund’s principal oversight 

entity at the country level, the Local Fund Agent (LFA), is one of several 

potential contractors hired by the Fund and is responsible for (1) ensuring 

that grant recipients account for the money they spend and measure 

progress in fighting disease and (2) assessing recipients’ ability to procure 

goods and services. However, the introduction of the LFA as an oversight 

mechanism has been marked by controversy and misconceptions, which 

have delayed the designation of LFAs in some countries, thereby slowing 

the implementation of grants. The Fund has recognized these challenges 

and is working to address them—for example, through its new guidelines 

on financial management. 

A lack of resources threatens the Fund’s ability to approve and finance 

additional grants. Although the Fund has announced plans to award new 

grants in its third proposal round, planned for October 2003, pledges made 

as of April 1, 2003, were insufficient to cover more than a small number of 

new grants. Specifically, the Fund projects that it will receive $1.6 billion 

in technically sound proposals at its next proposal round in October 2003, 

but it currently has less than $300 million to support this round of grants. 

In addition, without significant new pledges, the Fund will be unable to 

support all of the already approved grants beyond the initial 2-year 

commitments. If all currently approved grants demonstrate acceptable 

performance after 2 years, the Fund will require $2.2 billion more to assist 

these programs for an additional 1 to 3 years. 

The Fund has made improvements in its grant-making processes that 

enhance its ability to achieve its key objectives. These improvements 

include altering eligibility criteria to focus on the neediest countries and 

adding additional members to the proposal evaluation panel to increase its 
Page 3 GAO-03-755T 

overall knowledge base and better prepare it to evaluate nonmedical, 

development-related issues. However, the Fund faces the ongoing 

challenges of ensuring that its grants augment and complement existing 

spending on HIV/AIDS, TB, and malaria and that recipients have sufficient 

capacity to effectively use these grants. Although these coordination and 

capacity challenges are not unique to the Fund, the Fund has recognized 

them, and its efforts to address them are evolving. 

HIV/AIDS, TB, and malaria, three of the world’s deadliest infectious 

diseases, cause tremendous human suffering and economic loss and 

threaten political stability in many countries in sub-Saharan Africa and the 

developing world. According to the Joint U.N. Program on HIV/AIDS, in 

2002, AIDS caused 3 million deaths, and 5 million people became infected 

with HIV. More than 70 percent, or 28.5 million, of the 40 million people 

with HIV/AIDS worldwide live in sub-Saharan Africa. However, according 

to a report by the National Intelligence Council, HIV infections in just five 

populous countries—China, India, Nigeria, Russia, and Ethiopia—will 

surpass total infections in central and southern Africa by the end of the 

decade. According to the World Health Organization, after AIDS, TB is the 

world’s leading infectious cause of adult mortality, resulting in as many as 

2 million deaths per year. Like HIV/AIDS, TB primarily affects the most 

economically active segment of the population, with 75 percent of the 

annual deaths occurring in those aged 15 to 54 years. Conversely, malaria, 

which causes more than 1 million deaths and at least 300 million cases of 

acute illness each year, is a leading cause of death in young children. The 

disease exerts its heaviest toll in Africa, where about 90 percent of annual 

malaria deaths occur. 

The Fund was formally launched in January 2002. As of April 1, 2003, the 

United States had pledged $1.65 billion2

 to the Fund out of total pledges of 

$3.37 billion and was its single largest donor. (See fig. 1 for more 

information about the Fund’s first year.) 

 2

Through fiscal year 2003, the United States had appropriated up to $650 million to the 

Fund, and it has pledged an additional $1 billion over 5 years, beginning in 2004. 

Background 
Page 4 GAO-03-755T 

Figure 1: Timeline of the Fund’s First Year 

The Fund is a grant-making organization with the purpose of attracting, 

managing, and disbursing funds that will increase existing resources and 

make a sustainable and significant contribution to the reduction of 

infections, illness, and death. It aims for an integrated and balanced 

approach, covering prevention, treatment, care, and support. It also seeks 

to establish efficient and effective disbursement mechanisms. In the past 

year, the Fund has approved 153 grants in 81 countries across the major 

regions of the world.3

 These grants total nearly $3.7 billion ($1.5 billion 

over the first 2 years) and cover all 3 diseases (see fig. 2). The Fund began 

disbursing money to grantees in late 2002. 

 3

This country total does not include one global grant and grants to two regions. 
Page 5 GAO-03-755T 

Figure 2: Approved Grants, by Disease and by Regiona 

a

Based on maximum allowable grant money for the full length of board-approved programs for the 

Fund’s first two proposal rounds. 
Page 6 GAO-03-755T 

In its first year, the Fund developed and established key headquarters and 

country-level structures required to develop, implement, and oversee 

grants. (See fig. 3). However, limited communication and the evolving 

nature of these new structures, especially at the country level, led to a lack 

of clarity over roles and responsibilities, slowing the Fund’s ability to sign 

the initial grant agreements. The Fund has recognized these problems and 

is taking steps at both the country and headquarters levels to address 

them. 

Figure 3: The Fund’s Governance Structure 

Notes: The World Health Organization and the Joint U.N. Program on HIV/AIDS assist the technical 

review panel with data and other expertise. The Fund has entered into an agreement with the World 

Health Organization for the provision of administrative services at the headquarters level. 

The arrows denote relationships but do not specify their nature, e.g., information or money flow vs. 

accountability. 

The Fund Has 

Established 

Necessary 

Governance 

Structures, but Its 

Ability to Rapidly 

Disburse Grants Is 

Challenged at the 

Country Level 
Page 7 GAO-03-755T 

The CCM—the country-level governance structure designed to review and 

submit proposals and follow the progress of Fund-supported programs—

identifies a principal grant recipient. The principal recipient is a member 

of the CCM and is responsible for receiving and implementing the grant. A 

principal recipient can be a government agency, a nongovernmental 

organization, a private organization, or, if alternatives are not available, a 

multilateral development organization. 

As of late 2002, in three of the four countries we visited there was limited 

communication between the secretariat and the CCM and between CCM 

leadership and other members. These communication problems and the 

evolving nature of the country-level structures resulted in key participants’ 

being unsure of their roles in the proposal process and unprepared to 

support the implementation of grants. In one country, the CCM was better 

prepared largely because it had received a high level of support from Fund 

staff and strong leadership from the CCM chair; however, according to the 

Fund, it does not have sufficient resources to provide this level of support 

to all CCMs. The Fund has acknowledged the difficulties experienced by 

CCMs and is addressing them by clarifying its guidance to CCMs. For 

example, it is conducting regional workshops and working with local 

partners such as bilateral and multilateral donors. In addition, the Fund is 

considering expanding the secretariat to allow its staff to devote more 

time to advising individual CCMs and to working with local partners that 

are assisting with grant implementation. 

The Fund has developed systems for financial accountability and for 

monitoring and evaluating grant activities. However, in the Fund’s first 

year of operation, these systems faced challenges at the country level. The 

introduction of the local fund agent (LFA)—the Fund’s representative in 

each recipient country—has been marked by controversy and 

misconceptions regarding its oversight role. For example, several 

government officials in one of the countries that we visited believed, 

incorrectly, that a government ministry would be permitted to perform the 

functions of the LFA, even though the grant recipient is another 

government ministry. This contradicts explicit Fund instructions that the 

LFA must be independent from the grant recipient. Also, stakeholders in 

recipient countries have assumed, incorrectly, that the LFA was charging 

an exorbitant fee and deducting it from the grant. In fact, LFA fees are 

funded through the secretariat, not deducted from each grant. 

Finally, in countries with a limited number of qualified personnel and 

organizations, LFAs will face the challenge of maintaining the 

The Fund Developed 

Comprehensive 

Oversight Systems, 

but the Systems Face 

Challenges 
Page 8 GAO-03-755T 

independence necessary to avoid real or perceived conflicts of interest. 

These problems may delay the designation of LFAs in some countries, 

slowing the implementation of the first round of grants. The Fund is aware 

of these issues and is taking measures to address them. For example, in 

January 2003, the Fund drew up guidelines on financial management 

arrangements for principal recipients that, among other things, includes 

options for the use of credible, existing local systems. 

The Fund has developed detailed procurement requirements for drugs and 

medical supplies as well as more general requirements for procuring 

goods and services. These requirements are focused primarily on 

procuring drugs and public health products in a manner that ensures 

quality, safety, and the lowest possible prices. The requirements also 

stipulate that no Fund money may be used for procuring drugs or other 

health products until the Fund, through the LFA, has verified that 

recipients have the capacity to manage procurement tasks such as 

purchasing, storing, and distributing these products in accordance with 

Fund guidance, unless the Fund agrees otherwise. 

The Fund’s ability to approve and finance additional grants is threatened 

by a lack of sufficient resources. The Fund has announced plans to award 

new grants in its third proposal round in October 2003. However, pledges 

made through April 1, 2003, for this year are insufficient to cover more 

than a small number of additional grants. The Fund has less than $300 

million to support commitments in round 3—significantly less than the 

$608 million in 2-year grant commitments approved in the first round and 

the $884 million approved in the second round (see fig. 4). 

Lack of Resources 

Threatens Fund’s 

Ability to Continue to 

Approve and Finance 

Grants 
Page 9 GAO-03-755T 

Figure 4: Pledges Made, Amount Received, and Grant Proposals Approved 

a

The pledges expected through 2008 include $173 million that has no specified arrival date. 

b

These numbers represent the maximum amount approved by the board. Final budgets may be 

reduced during grant agreement negotiations. Five-year figures are potential, rather than guaranteed, 

commitments. 

Note: A shortfall in the funding of already approved grants is evident when 5-year commitments are 

compared with total pledges over this time frame. The small amount of resources available for 

funding new grants is evident when comparing 2-year commitments with pledges through 2003. 

Based on the number of technically sound proposals it expects to receive 

and approve in future rounds and the amount received as of April 1, 2003, 

the Fund projects that it will require $1.6 billion in new pledges in 2003 

and $3.3 billion in 2004. In addition, without significant new pledges, the 

Fund will be unable to support all of the already approved grants beyond 

the initial 2-year commitments. Specifically, if all currently approved 

grants demonstrate acceptable performance after 2 years, the Fund will 

require $2.2 billion more to assist these programs for an additional 1 to 3 
Page 10 GAO-03-755T 

years. Of the $3.37 billion pledged as of May 2003, 97 percent was pledged 

by governments and only 3 percent was pledged by the private sector, 

including foundations, corporations, and individuals. 

The Fund made improvements in its grant decision-making process and 

enhanced its ability to serve its key objectives. For example, the Fund 

altered eligibility criteria to focus on the neediest countries and added 

additional members to the technical panel responsible for reviewing 

proposals to increase its overall knowledge base and better prepare it to 

evaluate nonmedical, development-related issues. However, the Fund and 

its stakeholders have identified ongoing challenges to the grant decision 

process, including ensuring that grants augment and complement existing 

spending on HIV/AIDS, TB, and malaria and that recipients have sufficient 

capacity to effectively use the grants. For example, the Fund has not yet 

developed a system for monitoring whether the grants in fact add to and 

complement existing spending once disbursed. The Fund has recognized 

these challenges, and its efforts to address them are evolving. 

In conclusion, our assessment of the Fund’s first year of operation 

indicates that it provides a promising mechanism to complement bilateral, 

multilateral, and private initiatives to fight three of the world’s deadliest 

diseases. However, the Fund’s success will depend on its ability to meet 

the challenges of facilitating effective locally based governance and 

oversight mechanisms and raising sufficient resources to continue to 

approve and finance grants. The Fund’s success will also depend on its 

ability to ensure that its grants augment and complement existing 

spending on HIV/AIDS, TB, and malaria and that recipients have the 

capacity to effectively implement Fund-supported programs. 

Mr. Chairman and members of the committee, this concludes my prepared 

statement. I will be happy to answer any questions you may have at this 

time. 

For information on this statement, please contact David Gootnick, 

Director, International Affairs and Trade, at (202) 512-3149 or Thomas 

Melito, Assistant Director, at (202) 512-9601. You may reach them by email 

at gootnickd@gao.gov or melitot@gao.gov. Other individuals who made 

key contributions to this testimony include Sharla Draemel, Kay Halpern, 

and Tom Zingale. 

Improvements Made 

in Grant DecisionMaking Process, but 

Challenges Remain 

Conclusion 

Contacts and 

Acknowledgments 

(320192) 
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
GAO’s Mission The General Accounting Office, the audit, evaluation and investigative arm of

Congress, exists to support Congress in meeting its constitutional responsibilities 

and to help improve the performance and accountability of the federal 

government for the American people. GAO examines the use of public funds; 

evaluates federal programs and policies; and provides analyses, 

recommendations, and other assistance to help Congress make informed

oversight, policy, and funding decisions. GAO’s commitment to good government

is reflected in its core values of accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost is

through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and fulltext files of current reports and testimony and an expanding archive of older 

products. The Web site features a search engine to help you locate documents 

using key words and phrases. You can print these documents in their entirety, 

including charts and other graphics. 

Each day, GAO issues a list of newly released reports, testimony, and 

correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site

daily. The list contains links to the full-text document files. To have GAO e-mail 

this list to you every afternoon, go to www.gao.gov and select “Subscribe to daily 

E-mail alert for newly released products” under the GAO Reports heading. 

The first copy of each printed report is free. Additional copies are $2 each. A

check or money order should be made out to the Superintendent of Documents.

GAO also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a

single address are discounted 25 percent. Orders should be sent to: 

U.S. General Accounting Office 

441 G Street NW, Room LM

Washington, D.C. 20548

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800 

U.S. General Accounting Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Mail or Phone 

To Report Fraud,

Waste, and Abuse in 

Federal Programs 

Public Affairs